Gap Upgraded On Old Navy's Benefit From Mall Declines, Gap Brand Improvement

Gap Inc. was upgraded to outperform from perform at Oppenheimer on strength at both the Old Navy and Gap brands. The price target was raised to $28 from $24. Analysts highlight the 14.3% decline in Gap shares over the past month despite reporting earnings per share in the most recent quarter of 36 cents, which beat consensus and was up from 32 cents last year. Old Navy operates primarily "off-mall" and benefits from the "department stores' malaise," analysts wrote. Oppenheimer estimates that department stores have lost as much as $3 billion in women's apparel. "On average department stores have about 30% overlap with Gap's three big brands; no surprise, Old Navy is most exposed," the Oppenheimer note said. The Gap brand is also benefiting from adopting Old Navy's process of testing and quicker speed. Gap shares are down 0.2% in Monday trading, but up 18% for the past year. S&P 500 index is up 16% for the last 12 months.

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